SA soya beans to escape US-China trade spat

The global soya bean market is being rattled by the US-China trade war, but the outlook for South African consumers remains positive.

Despite the possibility of price shocks, meat prices should be cushioned by the ability to substitute yellow maize in feed stock, said agricultural economist Wandile Sihlobo. The tariff war was also unlikely to derail rapidly growing local production in the near to medium term.

Last week the US imposed a 25% tariff on $34bn worth of Chinese goods, prompting an immediate response from China of a tariff on US goods worth an equal amount, including soya beans. Soya bean prices, which are set globally, have plummeted since May, and reached a 10-year low on Thursday, but the longer-term effect is less certain, with some analysts expecting that rising protectionism may ultimately push up prices in the longer term.

Soya beans have been a target in China’s retaliation against US tariffs, with expectations that global supply could be disrupted as the US seeks new markets. US soya bean producers were under pressure as a result, with North Dakota soya bean processors "watching their selling season go to ruin", according to NKC African Economics.

Locally, soya production has grown rapidly in SA, with this season expected to produce a record 1.6-million tonnes, about three times the output in 2010, but SA remains a net importer.

Soya beans competed with yellow maize as both an input and in terms of agricultural land, which should help alleviate some of the effect of global supply disruptions, said Sihlobo. "But there is no certainty, that is one product we are exposed to".

South African production should continue to grow at the same pace it had over the past few years — about 20% — but the competition with yellow maize in terms of agricultural land should ultimately slow down this pace of growth, he said.

China is the largest consumer of soya beans, while the trade war has primarily benefited Brazil, which is now receiving a price premium on its exports to China, according to reports. China has not entered into any new contracts with US suppliers since the end of June.

Prices for the November soya bean contract, which will be harvested in the northern hemisphere, were at $851 a bushel on Wednesday, a 19% drop since May.